(Any views expressed in the below should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)
In one week’s time, a new type of crypto derivative – the ETH staking yield swap (ETHYLD) – will arrive at BitMEX. It’s an addition that means traders will soon be able to hedge and speculate on daily ETH staking rates via our ETHYLD contract – with up to 2x leverage.
The introduction of ETH staking yield swap contracts will unlock new trading and hedging opportunities for our users – including the ability to take positions on the value of ETH staking (and validator rewards). It’s all part of our ongoing focus to enhance the versatility of our platform, with more additions planned in the coming weeks and months.
For the lowdown on our upcoming ETHYLD swap listings, read on.
If you haven’t yet signed up for a BitMEX account, you can do so here.
The 101 on Our ETH Staking Yield Swap Listings
Invented by BitMEX, our upcoming ETHYLD contract allows traders to “swap” the variable yield that emanates from staking ETH on Lido (floating rate) for a fixed interest rate (fixed rate) – and vice versa – with up to 2x leverage.
There are two sides to an ETHYLD swap trade. Each day during the life of the contract:
- One trader, the “Payer”, pays the fixed rate and receives the floating rate.
- The other trader, the “Receiver”, receives the fixed rate and pays the floating rate.
A trader who has staked ETH on Lido – and also received fixed on an ETHYLD swap contract – will net receive the fixed rate on their staked ETH (thus converting the uncertain daily variable rate that is derived from staking ETH on Lido into a known fixed rate). This is illustrated below:
The fixed rate represents a trader’s best guess of the average daily ETH staking yield – from the inception of the contract until maturity. It’s the rate that traders speculate on, and will be an annualised rate.
Settlements will occur daily at 12:00 UTC.
Our upcoming ETH staking yield swap may be ideal for:
- Users who have staked ETH on Lido, and wish to lock in a fixed yield
- Users who are using other methods to stake ETH, and wish to use our ETH staking yield swap contracts as an indirect hedge
- Speculators who wish to take positions on the value of ETH staking or validator rewards
- Anyone with holdings – or an interest – in ETH
ETH Staking Yield Swap Contract Specs
Like all crypto derivatives contracts on BitMEX, it is possible for ETHYLD traders to take a leveraged position. In addition, traders can also hold a position as long as they allocate enough margin to satisfy the maintenance margin requirement – once this is not the case, the trader will get liquidated.
However, there are also several key differences between our ETHYLD listing vs. other crypto derivatives listings that users should be aware of:
- Traders ‘Pay’ or ‘Receive’ the fixed rate on an ETH staking yield contract, rather than Buy or Sell
- If a trader Pays, they will pay the fixed rate and receive the floating rate.
- If a trader Receives, they will receive the fixed rate and pay the floating rate.
- The market price of an ETHYLD swap contract on the exchange is the fixed rate.
- The floating rate is paid to the ‘Payer’ positions by the ‘Receiver’ positions each day at 12:00 UTC, in exchange for paying/receiving the fixed rate. Details of the daily interest rate calculations are shown below:
- For example, a trader paid 4% on 1 ETH notional of ETHYLD swap contracts. If the floating rate on a particular day is 4.5%, the net amount received by the trader will be: 1 ETH x (4.50% – 4.00%) x (1 / 365) = 0.00001370 ETH
- BitMEX charges traders (on both sides) a fee of 0.0005% of the position when Floating Funding payments are made (so that a position of 1 ETH will attract a Floating Funding fee of 0.000005 ETH).
- The Position and Settlement Values of an ETHYLD swap contract both depend upon the number of days remaining on the contract.
- If a trader Pays 4.00% on 1 contract (which has a notional size of 1 ETH), and there are 100 days until expiry, the Position Value is: (1 ETH x 4.00% x 100 / 365) = 0.000055 ETH
- If a trader closes out their position by Receiving 4.20% on 1 contract and there are still 100 days until expiry, their PnL (Settlement Value) is: (1 ETH x (4.2% – 4.0%) x 100 / 365) = 0.0005480 ETH
- If there are now 99 days left, the Position Value will decrease to: (1 ETH x 4.00% x 99 / 365) = 0.0108493 ETH
Key Contract Details for Our ETHYLD Listing:
- Symbol: ETHYLDZ22
- Expiry date and time: Quarterly on the last Friday of every calendar month at 12:00 UTC
- Margin currency: ETH
- Price quotation: Annualised Yield (as an absolute number on API and as a percentage on the BitMEX trading page – for example, a 4.5% p.a. yield will be displayed as 4.500 on the trading page and will be 0.045 on the API)
- Price limits: Limit Up and Limit Down set hourly at Mark Price +/- 20%
- MarkMethod: LastPriceAdjusted*
- Auto Deleveraging: Enabled
- Contract Size and Minimum Trade Amount: 1 ETH
- ETH Contract Value: ETHYLD Price * Days to Expiry / 365
- Floating Index: .BETHYLD (The Lido ETH staking yield as recorded each day by BitMEX)
- Settlement Index: .BETHYLD
- Max Leverage: 2x
- Maker Fee: -0.01%
- Taker Fee: 0.075%
- Base Initial Margin: 50.00%
- Base Maintenance Margin: 10.00%
- Floating Funding Settlement: Daily at 12:00 UTC
- Floating Funding Fees: Both sides pay 0.0005% daily
*Last Price Adjusted is a marking mode that functions similarly to simple Last Price marking, but with adjustments to allow for Yield Swap Floating Funding payments. Please see here for more details.
The Price is adjusted to take into account the next Floating Funding payment
The ETHYLDZ22 listing is now live on Testnet, along with the full contract specs.
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In the meantime, if you have any questions please contact Support.